Congress is up in arms about soaring drug prices. A study by the Government Accountability Office finds that the price of brand-name prescription drugs soared at an annual rate of 8.3% from 2006 through the first quarter of 2010. That’s more than double the rate of inflation, which averaged 3.8% over the period. It’s also faster than brand-name prescription drug inflation between 2000 and 2006, which averaged 6% a year.

The Great Stagnation, an intriguing new book by George Mason economist Tyler Cowen, co-author of the Marginal Revolution blog, has sparked a fantastic debate about whether and how the Internet has contributed to our economic wellbeing. The book ponders why the Internet, revolutionary as it is, hasn’t produced much of a boost to economic growth, employment or family incomes –as earlier technological revolutions did. There is a great review in The Economist here.

Some have embraced the argument. But he is getting push-back from a lot of people. Hal Varian, Google’s chief economist, argues here that Cowen is looking for the benefits of the Internet in the wrong places. Economic historian Brad Delong of Berkeley agrees: the Internet might not have boosted employment or national income, but it has increased people’s well being enormously, reducing the costs of all sorts of things –from researching a book to discovering new music to finding a good doctor. Arnold Kling takes Cowen on from a different political perspective.

Americans pay a lot to keep illegal drugs off the streets. A recent review of the evidence suggests much of our investment in the Drug Wars is wasted, if not outright counterproductive. We have only 5 percent of the world’s population yet about a quarter of the world’s prisoners. Four fifths of the 1.8 million arrests made in 2007 were for drug possession. In 1980, 40,000 people were jailed on drug charges. Today the figure is about half a million. Continue reading →

A couple of days ago I mused about our desire for unique objects. I pointed to research suggesting that our motivations aren’t merely market driven. It’s not just about rationally assessing the object’s resale value.

A story in today’s New York Times underscores just how irrational our desire for certain unique goods is. Guitar aficionados are not only willing to pay $1 million for a guitar owned and played by Eric Clapton. They are willing to pay $20,000 to own a fake copy of that same guitar. What’s worth so much? Clapton’s magic:

“Cultural practices such as burning voodoo dolls to harm one’s enemies are consistent with a belief in the law of similarity,” Dr. Newman said. “An identical Clapton guitar replica with all of the dents and scratches may serve as such a close proxy to Clapton’s original guitar that it is in some way confused for the real thing. Of course, the replica is worth far less than the actual guitar that he played, but it still appears to be getting a significant amount of value for its similarity.”

At first blush it might seem to make sense for cash-strapped cities to charge drivers for car accidents, a quick and easy way to raise revenue for the fire department and the police. But there are costs involved too. Getting drivers or their insurance companies to pay can be expensive. And the bad blood generated by the new crash charge is also costly.

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EDUARDO PORTER

Eduardo Porter writes about business, economics, and many other matters as a member of the New York Times editorial board. He has also worked as a journalist in Mexico City, Tokyo, London, São Paulo, and Los Angeles. He was the editor of the Brazilian edition of América Economía and covered the Hispanic population of the United States for The Wall Street Journal. He lives in New York.